Wednesday 24th May 2017 - RUC Magazine

CO2 emissions and heavy duty vehicles – the bell is tolling for you in the EU

Features

Heavy duty vehicle CO2 emissions have not improved in the European Union in over ten years. Here, Lisa Townshend looks at a proposed toll that incentivises the use of low carbon trucks by hauliers…The truck manufacturing industry seems to have gotten off lightly in the surge to impose, introduce and develop more fuel-efficient and less polluting vehicles. In the last decade, there has been little in the way of a reduction in emissions from heavy duty vehicles (HDVs) in Europe – in fact, according to a recent report by the International Council for Clean Transportation (ICCT)1, emissions from HDVs (which include trucks and buses) increased by 36% between 1990 and 2010. HDV emissions currently represent around 30% of all road transport CO2 emissions and unless additional measures are taken by 2030 it is expected that HDV emissions will increase to more than 40% of road transport CO2 volumes.

So, what can be done to help reduce the levels of CO2 emissions coming from the fleets of HDVs using Europe’s roads?

Transport & Environment (T&E), the European NGO that focuses on the promotion of transport policies based on the principles of sustainable development and environmental considerations, has been lobbying the European Commission for 25 years for better transport policies and influencing policy changes to vehicle manufacture for sustainable environmental improvements. T&E has been looking at ways in which road tolling can be differentiated based on the CO2 emissions of HDVs – a move which could have fantastic results on levels within Europe and also savings for hauliers across the continent in terms of fuel and toll reduction.

In order to bring about whole scale changes across the European region, T&E commissioned a report on the feasibility and scope of a CO2 differentiated truck toll and how this could be implemented. Prepared by CE Delft and titled CO2 differentiated road charges for HGV’s – a scoping study2, the document and subsequent briefing3 by T&E lays out the context for toll differentiation of this kind and how it could be implemented in practice by EU member states to help them meet climate targets.

William Todts, Director, Freight & Climate at Transport & Environment, discussed how the study came into being. He says: “The idea was that the European Commission is planning to revise the road charging directive. At the same time the focus from EU policy and also EU transport policy is on reducing emissions from transport. Separately the Commission is launching a 2030 climate and energy package and a decarbonisation of transport strategy; our thinking was ‘how can we amend the road charging directive to maximise its positive impact on climate change?’.

“The starting point was that currently road charging as it exists mostly for lorries in central Europe is differentiated based on damages to the road – so external costs. But CO2 is not an external cost. And so you have the differentiation on the basis of euro classes related to air pollution. We wanted to have a look at whether it would be possible to have a similar system for CO2 emissions.

“It’s important to clarify that what the study/briefing is advocating is not to add CO2 to the external costs – we are NOT saying that the total cost for hauliers or truckers should go up. We are saying that tolls should be differentiated on the basis of the performance of the vehicle in the same way that currently it is differentiated on the basis of Euro 4,5,6 emission limits.”

The concept of charging trucks based on their CO2 emissions was sparked in Germany as they look to find ways to encourage truck manufacturers and hauliers to supply and use respectively more fuel efficient HDVs. Todts explains: “The German government is actually our inspiration for this idea. Part of the German climate action plan for 2020 is that they say that they want to start using the differential tolls to incentivise the use of more efficient freight vehicles. So we wondered how this could be done on a European scale. That is what the study tries to answer.”

The briefing document published by the T&E sets out the rationale behind the toll differentiation model and how it could work in principle. One of the fundamental rationales behind it is the need for an efficiency drive within the HDV market. The briefing states: Fuel represents between a quarter and a third of long distance haulage costs. Hence, it could be expected that trucks would become ever more efficient. However, this is not the case. During the last two decades new truck fuel efficiency has barely improved. This is because differences in fuel economy are often small and, therefore, fuel efficiency is often not the decisive factor when buying a new truck. Uncertainty over payback periods and difficult access to finance also play a role. On top of that, the European Commission accuses truckmakers of cartel practices. So it is clear that trucking needs an efficiency push.

Contrary to passenger cars, there are currently no fiscal or economic instruments to incentivise efficient truck purchasing. Having CO2 differentiated road charging or taxation would push the market to provide more fuel-efficient HGVs, as hauliers would have an extra incentive to buy more fuel-efficient vehicles.

One thing the briefing is keen to stress is the need for any EU policy to be a supporting mechanism for member states and to help ensure fair pricing and competition – but that the EU should refrain from prescribing exactly how governments design the CO2 charging policies. The Euro-vignette directive establishes a framework to encourage road charging for HGVs within the EU. For those countries who wish to introduce road charging within their borders, there are rules in the directive that define the methodology in which member states may charge trucks.

Action must come at an EU level in order to avoid situations where differentiation is set in a manner that is inconsistent. The directive itself establishes that “inconsistent charging schemes should be avoided in order not to distort competition in international goods transport”. In 2012, an Internet consultation of stakeholders was organised where 75% of respondents expressed that differences in the type of charges on vehicles between member states distort competition between hauliers. Since the haulage market is a very international market we need to avoid this if charges are to be differentiated based on CO2 emissions for HGVs in Europe. At the very least the EU should define general principles and guidelines for member states to follow when they introduce differentiation.

Todts is hopeful that a toll policy such as this will have a real impact on the way people manufacture and buy HDVs in the future. “What we see is that currently for trucks – there is no fiscal policy that incentivises the purchase of a very efficient or low carbon truck. For cars and vans we have all sorts of schemes – for example company car tax you have the purchase tax you have circulation tax… lots of taxes that steer you in a low-carbon direction. For trucks, essentially you have the fuel tax and then I think in some countries you have a circulation tax which is quite low and that’s it. And then you have the road toll, which is a significant cost and all of these except for fuel tax, which for trucks is significantly lower than for cars, it doesn’t really steer the truck industry into a more low carbon direction.

“What we would like to see with this study and hopefully with a new Commission proposal member states starts using tolls for lorries to incentivise more fuel efficient vehicles and retrofitting more fuel efficient technologies and essentially make it even more attractive for truckers to buy technologies that save them money. Because that’s essentially what it does – you can buy a device or an aerodynamic feature on your truck that saves you maybe 2-3% of fuel and then if you get a discount on the toll your business case just improves dramatically.”

One thing that would make it easier to implement a CO2 differentiated toll is the establishment of a calculating tool such as VECTO. An abbreviation of Vehicle Energy Consumption Calculation Tool, VECTO is a simulation tool that calculates the CO2 emissions of HDVs. The idea behind this tool is to present information on the energy efficiency of a HDV so that customers can select their truck based on VECTO figures. Being introduced sometime this year, it is exactly the type of system that would allow for meaningful testing of vehicles for their CO2 performance. The briefing highlights: CO2 differentiation must be based on the commonly agreed VECTO procedure. CO2 differentiation of tolls would provide an immediate practical use for such information. Furthermore, it would be in the interest of the toll collectors and public authorities to ensure accurate VECTO testing, which would strengthen the credibility of VECTO.

For those trucks that do not have a VECTO CO2 certificate, and for which there is no reliable data on its energy performance, there could be the highest CO2 related HGV toll applicable. Although this could be perceived as arbitrary by owners of older vehicles, we feel this is a sensible approach since new vehicles are very likely to be more efficient than older ones. This is also currently the mechanism used for charging HGVs when there is no EURO class information. Finally, this approach would encourage fleet renewal, which would have wider economic and safety benefits.

So we have an idea and we have a means to verify it, but what does this mean in practice? Is an idea like this able to get buy in from stakeholders such as manufacturers and hauliers? Todts believes so. “For the last decades the focus has been very much reducing CO2 from cars, which of course is the largest source of transport emissions. However, more and more governments are realising that heavy duty emissions are a big problem and one that will continue to grow. Whilst for passenger cars we have made a start with more fuel-efficient vehicles with some hybrid cars with some electric cars – for trucks there is nothing of the sort happening. As part of the 2030 climate plans that governments will have to fulfil they just cannot afford to ignore trucks. There is a number of technologies that exist in the market and I think that the market, there seems to be a bit of hesitation on the market to adopt these technologies on a larger scale. We are going to give the market a little bit of a push and then that should be quite beneficial for the operator and for the government. I’m hopeful that this kind of system can be introduced. Then the other question is how manufacturers react. This really works on demand, supply and demand. With fiscal measures you can encourage demand for certain technologies you can have a little impact on supply but if you want to do something a little more fundamental on the supply of fuel efficient trucks you’ll have to do more than just differentiate the tolls and tax levels.”

Of course, it is one thing to have the idea and tell other people, it is another to get it into practice. And this is no exception. Todts explains: “If the commission come to a proposal in 2016 – it takes a year and a half or so to adopt a proposal. So by 2018 hopefully the proposal will be adopted and then it needs to be transposed and the governments can choose how they do that. So realistically speaking by 2019-20 it should be possible for governments to be able to do this. If they are very enthusiastic they can even try to go a bit quicker!”

But what about the impact in real terms to the thousands of trucks on Europe’s roads? Will this make for a good business case that will see hauliers adopt it, or will it cause more burden on an already overburdened sector? Todts thinks the former. “I think the real impact would be for trucking companies would be very significant if you are driving hundreds of thousands of kilometres on tolled roads whether you pay one cent more or one cent less makes a big difference. In the past tolls were used to steer you to use trucks that were cleaner that were less polluting in terms of things that make us sick, air pollution. There is a huge benefit for society but a lot of hauliers they felt that it was mostly a cost. The vehicles were not much better for them; they were much better for society. Here the differentiation will steer them towards something that will actually also be better for them – it just makes saving fuel even more attractive than it already is for them because they are businesses. I think that for them it could be extremely beneficial and also for the manufacturers of all these technologies because there will be extra demand for these technologies. I think all in all it is a very positive story.”

References
1. Overview of the heavy-duty vehicle market and CO2 emissions in the European Union. Rachel Muncrief and Ben Sharpe, Dec 2015. http://www.theicct.org/overview-heavy-duty-vehicle-market-and-co2-emissions-european-union

2. CO2 differentiated road charges for HGVs – a scoping study. CE Delft, Aug 2015. http://www.transportenvironment.org/sites/te/files/publications/CE_Delft_4D64_CO2_based_road_charging_HGVs_Def.pdf

3. CO2 differentiated truck tolls – what the EU should do. Transport & Environment Consultation Briefing, Oct 2015. http://www.transportenvironment.org/publications/co2-differentiated-truck-tolls-%E2%80%93-what-eu-should-do

This article first appeared in Road User Charging magazine Winter 2016